Dark Fiber, Our Ace in the Hole

“The City dark fiber network may provide the key that unlocks the Fiber to the Premise (FTTP) treasure chest the community has sought for over a decade,” community activist Bob Harrington says. “Use of excess dark fiber strands and current dark fiber licensing revenues could provide all the incentive needed to entice a citywide open FTTP network to be built and operated by a private party to offer fiber optic quality services to virtually every premise in our community.”

In 1997, Palo Alto Utilities used optical fiber cable to construct a 41-mile dark fiber backbone ringing the City. The cost of construction was about $2 million. The City began leasing fiber strands to commercial customers and gradually built a dark fiber business. This was in response to citizens lobbying Council for a citywide fiber network beginning in 1993.

“Dark fiber” signifies an optical fiber strand with no optical communication system attached. For a dark fiber network owner like the City’s Fiber Optic Utility, “dark fiber” has come to mean the City (fiber owner) does not install electronics (other than for its own account) on the fiber or offer services utilizing lit fiber. To make the dark fiber strands useful, licensee customers must install and maintain their own optical communication systems.

To help a new citywide open lit fiber optic network succeed, the City noted in its September 2006 RFP that it may be willing to grant use of the City’s excess dark fibers as well as the now-abandoned FTTH Trial fiber in the Community Center neighborhood, and the City Council might consider ways the dark fiber commercial business might be managed by another entity. The City’s foresightful ownership of dark fiber may make financially feasible the entire city being served by lit fiber, essentially creating another significant City resource, Fiber to the Premise.

As compensation for City cooperation enabling the open FTTP network to be created cost-effectively by the special purpose entity (SPE), the City will have the option to acquire the entire citywide lit FTTP network, years hence, for $1. In effect, this strategy would greatly expand the next significant Palo Alto utility, the Fiber Optic Utility.

Utility investments in general continue to pay big dividends to Palo Alto. The City's General Fund currently enjoys a significant return of $14 million per year on Palo Alto’s original utilities’ investments made over a century ago. Our community saves another $14 million per year from lower utility rates versus those combined rates experienced in surrounding communities. The financial benefits from City-owned utilities Palo Altans receive, which regretfully are not available to those in surrounding communities, now add up to at least $28 million per year.

Community savings on utilities should immediately go up another significant notch with the introduction of a Palo Alto open FTTP network. The powerful FTTP network may create competition sufficient to compel incumbents to lower service rates on data, video, and telephone services for both businesses and residents enabling our Palo Alto community to save at least an estimated $6 million annually.